In a big setback to power traders, such as the Tata Power Trading Co. Ltd , NTPC Vidyut Vyapar Nigam Ltd, Adani Enterprises, PTC India Ltd and Reliance Energy Trading Ltd , the Supreme Court on 15-03-2010 held that the Appellete electricity tribunal(APTEL) has no jurisdiction to look into the validity of regulations framed by the Central Electricity Regulatory Commission (CERC), including the regulation to fix cap on power trading margins. The apex court dismissed petitions of power trading companies which had challenged the regulator’s move to cap trading margin at 4 paise per kWh through a regulation in January 2006. It later increased this to 7 paise on trades done at a rate higher than Rs3 per unit of power.

A five-member Bench headed by Chief Justice K G Balakrishnan dismissed the appeals filed by power trading companies. The court clarified that the interpretation was only applicable to CERC and cannot be extended to other regulators.

“The Appellate Tribunal for Electricity (Aptel) has no jurisdiction to decide the validity of the Regulations framed by CERC under Section 178 of the Electricity Act, 2003. The validity of the Regulations may, however, be challenged by seeking judicial review under Article 226 of the Constitution of India,” the court said.

CERC had imposed the cap to check the prices of short-term power and prevent traders from making supernormal profits. India faces an electricity shortage of 12% during peak demand. “The Apellate Tribunal for Electricity has no jurisdiction to decide the validity of the regulations framed by the Central Electricity Regulatory Commission,” the judgement stated. Instead, companies can seek relief by directly approaching the high court. The companies first approached the tribunal which dismissed the petition on the grounds that it has no jurisdiction. Since the matter involved an important question of law, it was sent to a five-judge Constitution bench for settlement.

Vikas Singh, counsel for PTC India, had argued that fixing trading margins was contradictory and harmful to the functioning of the market. Such capping of margins results in relegating electricity traders to mere commission agents, he had said.Trading has stagnated because of the cap of 4 paise per unit on trading margins stipulated by CERC.

Solicitor general of India Gopal Subramanium, who argued for CERC, said some traders were operating on higher margins; since margins determined the final price for retail consumers, regulation was required to protect them, he said.

However, it clarified that the findings relate to only to the provisions of the Electricity Act, 2003 and does not hold true for other tribunals like Securities Appellate Tribunal (SAT) or TDSAT